In their quest to alleviate their allergies, brothers Eugene and Michael Ravitsky procured the ideal air purifier together they launched FactoryPure, and expanded their business to include heaters, generators, air compressors, and other household machinery. In this episode of Shopify Masters, Eugene shares their strategy to finding eight-figure success in a high cost, low margin industry.
For the full transcript of this episode, click here.
- Store: Factory Pure
Recommendations: Simple Purchase Orders, Email Marketing Follow Up,
Page Load Magic by Kaleido, NoFraud, Signifyd
Why a low barrier to entry isn’t always ideal
Felix: Tell us about the genesis of the business.
Eugene: When we started FactoryPure in 2013, we started as an air purifier company. That's where the name FactoryPure actually originated. The reason that we started with air purifiers is that it was fairly easy to get started with a dropshipping model. We just had to throw up a generic website. A lot of the brands were willing to work with companies that didn't have any track record or sales. It was very easy to get started.
We quickly found out that it's also very hard to compete. The same reasons why it's easy to get started are the reasons why there's no barriers to entry. We pivoted several times and landed on what we do now, which is primarily power equipment generators. We do a lot of other products, but generators make up a big chunk of what we do.
With generators or with heavy equipment in general, the manufacturers are a lot less willing to do dropshipping. We happen to have a warehouse that our father was not using at the time, so we were able to move into that and take advantage of that resource that a lot of other companies didn't have. At the time there was a lot less competition because you had to have a place to store the equipment, you had to have machinery to move it. You had to get shipping rates that would be sufficient to compete with a lot of the bigger guys. We pivoted to that and it worked out better than air purifiers.
Felix: You mentioned the low barrier of entry. What is your background? How did you get into this business opportunity?
Eugene: I started this business with my brother Mike. Before we did FactoryPure, we had another ecommerce company where we sold electronics, We learned a lot about ecommerce in general in the first business, so we decided to stick with what we knew. When we started FactoryPure, it was a lot easier to scale because there was Shopify and several companies similar that allowed you to create a scalable website yourself that does all the backend analytics and administration, which we didn't have with the first business.
Felix: What were some of the foundational skills that allowed you to pivot and run multiple businesses?
Eugene: The main thing for us was getting the knowledge of ads. Google ads is primarily how we started advertising, and what we still do today. Google ads are very easy to overspend and not get a return on your investment. It was mainly about nurturing the tactics for Google shopping ads, figuring out what keywords people are searching for, what keywords don't convert and removing those keywords. That is identical from one ecommerce shop to the next.
Achieving profitability as a high cost product and distribution model
Felix: The logistical pivot to generators was more challenging, so less competition. What were your first steps to getting started?
Eugene: Our first account we were required to take 10 generators. We decided that's what we want to do. We knew that we had a warehouse. We didn't have any shelving or storage. We told them yes, ship the generators, we have a warehouse to put them in. Then we realized we didn’t have a forklift, we didn't have a way to unload this from the freight truck or to package and ship it outbound. While the items were being sent, we were quickly scouring Craigslist trying to find a forklift. We found one and got it in time.
We started off by moving into our father's warehouse. He had a couple of offices that we were able to use. If we didn't have that, I'm not sure if we would've really moved forward in this venture. Because we had that lined up, we were able to reach out to brands and say, hey, we have somewhere where we can store your product, let us know your pricing. Most of them were fairly receptive.
Felix: What was your strategy for making sure that you didn’t dip too far into the red, with this model?
Eugene: The first order was actually refurbished generators. They're about a thousand dollars each. Most of these companies will require a $30 to $50,000 initial buy. At the time, it was less, but still substantial. We did have the funds, but it was a lot of money for us. We thought it was worth taking the risk.
Felix: Who were the initial customers?
Eugene: It was all B2C. We had our website up already where we were selling air purifiers. We threw up generators there as a category and listed the products for the end consumer.
Felix: Did the target market for the air purifiers transfer over well to the generators?
Eugene: There's definitely different traffic and different demographics. With Google ads, it's very easy to pivot and kind who you're targeting even by your campaign. It really wasn't difficult to have a few different product types that had different demographics.
Organic versus paid acquisition, and determining what works for your business
Felix: What mix of traffic was organic versus paid acquisition?
Eugene: It was mostly paid ads. We did a lot of guest posting and tried to get our SEO link juice up. We spent six to eight months writing. Since we were doing air purifiers, we were writing articles and reaching out to blogs on allergies and asthma. We were writing these guest posts for them, and then they would include our links. We did have some organic traction. As we scaled to other products, we decided to forego that since it was very time consuming, and go heavier on ads. It was a little bit of both, but much heavier on ads, especially as we added new product categories.
Felix: Why do you think guest posting wasn’t as successful? Was it industry specific?
Eugene: It was just very time consuming. It's very manual. You have to do the research on higher authority sites that would allow you to write guest posts, you had to reach out to them, and a very small percentage actually responded and allowed you to write guest posts. Then you had to actually write them. It was very, very slow. Usually with SEO, that's not abnormal. It'll take six months, a year, two years, before you get that traction. It’s not that it didn’t work, we just abandoned it because we thought our resources and time would be better spent elsewhere.
Felix: So you decided to go with Google Ads. Is Google Ads the strategy you still use today?
Eugene: We go very heavy on Google ads. We've recently dabbled in Facebook ads, which is a little more manual than Google, because you have to roll them out individually. Still mostly ads on our side.
Felix: Those initial customers, were they all from Google Ads?
Eugene: That was certainly all from ads, because at that point we'd just gotten the generators and listed them. We hadn’t done any organic SEO guest posts, and not towards generators. It was all from ads.
The quickest way to establishing trust with partners
Felix: Demonstrating revenue was the biggest source of establishing trust. What initiated that trust?
Eugene: My answer was usually fairly simple. Throughout the years we’ve developed amazing keyword analysis. We're not going to target the same keywords that everybody else is. The brands that we currently carry from day one, you'll see a revenue spike. We’ve learned over the years what keywords work. We've done a lot with negative keywords.
When we were trying to push refurbished a little bit more–we might still rank very high–but when you tapped in “refurbished generators” on Google, we were the number one result. We were the first and second results. It was our main page and then our generator page.
Felix: This was all ads?
Eugene: This is just organic. Because there's not a lot that did the refurbish, we were able to just through our keywords essentially. Because there's not too much competition, we were able to rise pretty high organically with those keywords. It was a combination of the two. We were even okay with a probationary period for them to see what we can do. Sometimes it worked and sometimes it didn't. Even with the sales that we do today, there are still brands that aren't giving us accounts.
Felix: Looking at your popular items, you have a coupon code provided right there on the product page. Is there a psychological motivation behind doing that?
Eugene: There definitely is a point. Some products we’ll put a coupon code regardless, because people ask all the time for discounts on the product–it saves that question. Other products are MAP products so you can't actually advertise it in Google below a certain amount, but you can still sell it below a certain amount. Those are the two reasons. For some of the products, the reason that we put the coupon code in there is because we can't actually advertise the product lower than what it's listed for.
The paid acquisition strategy that prevented wasted dollars
Felix: You had great success with Google ads. For someone who is completely new to paid acquisition, where should they begin?
Eugene: Anytime that you're selling a product, Google shopping is a very easy place to start. Essentially, through Shopify you have a data feed of all your products that can get imported into Google. It's very easy. You can throw all your products into Google and start getting traction that way. You don't have to create manual individual ads like you do if you're going to do text ads. With shopping ads, you can throw the whole data feed in there.
When you do that you need to have a hierarchy for your campaign. I would say hire an ad agency to set that up for you, and then you can manage it yourself or you can pay them to manage it individually. What can happen is with Google if you're not targeting the right keywords, or removing keywords that don't convert, it can get very, very expensive. They have what's called negative keywords in your ads where you can put negative keywords that won't show up if somebody's searching those keywords.
Some examples of that would be, if somebody's looking for a product manual, or somebody's looking for troubleshooting or whatnot. You don't want to pay for them to click on your ad because you know they're not shopping for a product. The other traps are just very generalized keywords. Say if somebody's searching for something very vague. We sell water heaters, so if somebody's searching for a water heater, there's a very low chance that they actually could invert because they could be looking for anything. Same thing, they could be looking for troubleshooting, or a manual. They could be looking for a water heater but they have no idea what they want at that point.
We try to target longer-tailed keywords, where people are a little bit further into the process and they know what they want. They're searching not just for a water heater, but they're searching for a specific brand or a specific size or fuel type. The more these keywords that you can stack together if people are searching for that phrase, they're more likely ready to buy. Let's say you have $50 a day to spend on ads, you'd want those $50 to go to those longer-tailed keywords than somebody searching just for water heaters.
Felix: This method, it seems highly replicable for your competitors.
Eugene: You certainly can replicate it to an extent. There's free keyword tools out there where you can see what people are searching for. What they don't have access to is what actually converts. They can see what's bringing traffic to your website, but they don't know which of those customers actually convert. That's something that only you know. You can then reinvest more money into those campaigns that actually convert.
Felix: It's almost like you're paying to learn about what works and what doesn't work because you had mentioned negative keywords as a great way to squeeze more margin out of these ads. Then over time, making these tweaks based on your sales numbers.
Eugene: You do have to give it a certain amount of time. You can't just put an ad for one day and say, this word converted and that one didn't. You'll want to refine that over a few months to trust the data. There will be some initial expenditure to figure out what works and what doesn't before you can curb back the ones that don't work.
Felix: What is the pre and post conversion customer journey for Facebook?
Eugene: What's nice about Facebook is you can get a lot more granular on who you're targeting, because Facebook knows basically everything about you. You can target people based on anything from what they do for a living to what they've already liked on Facebook. If they've perhaps liked a brand that you carry or they've liked one of your competitor's websites or whatnot, you can target them based on that. Of course, age demographics and everything like that as well.
With Facebook, it's been a bit more of a manual process because you do have to create one ad at a time. Essentially what I've done is, from our Google ads we know what our demographics are, and then I'm able to search those out on Facebook. Right now, we deal with a lot of trades. We deal with a lot of electricians, and plumbers that are actually installing these generators. They'll buy whatever they need, five, six at a time sometimes, and they'll install it locally. We're targeting those key terms when we can as opposed to individual consumers.
The tech stack for ecommerce success
Felix: Do you notice an uptick in demand around natural disasters or certain predisposed geographical areas?
Eugene: There's certainly a big uptick anytime there's a disaster. In the fall, there's usually hurricanes in Louisiana, Texas, Florida, almost every year, at least one if not a handful. Generally when they announce that a hurricane is on its way, all their local Home Depots and Lowe's, everybody sells out because they don't have that much inventory. People then switch to looking online, which is its own logistical issue of getting it there before the storm. Sometimes possible and sometimes not. You can't really get it there after the storm because there's usually debris or flooding. It can be a month until you get them the item.
Last year in Texas, we had that major freeze, which was very atypical for us. It spurred demand. A lot of people lost power. Last year, Texas was our number one market–usually number four or five. That disaster in February spurred demand for the rest of the year because people wanted to make sure that the following year they were more prepared.
Two, three years ago California started having their wildfire issues and they were shutting power down to people's homes without any notice. Then California became a hotspot. Any new disasters that happen or any new infrastructure issues can lead to that market being either temporarily or permanently a new fixture.
Felix: Do you have a protocol of action when you anticipate this kind of stuff happening?
Eugene: Generally it's very sudden. It's nothing that we can really react to when it happens, but we try to be prepared for things like hurricanes because they happen every year. By the summertime we try to be prepared. We usually have one more customer service rep than we actually need just because we know in the second half of the year, it could be very, very busy.
Lately, every industry's had supply chain issues, so it's been more difficult. We just finished a second warehouse right next to our current warehouse. Our goal is now that we have a lot of space, by the summertime we'll be able to order a lot more inventory than we've previously been able to. That way, by the time those disasters hit, we'll be able to ship them right away as opposed to waiting for the manufacturer to send it to us and then sending it out to the customers.
Felix: What other apps or services do you use on the website?
Eugene: We have some apps and some backend systems that were custom made. The features where we can adjust how the shipping time for a certain product is displayed on the front end, that's something custom that we had on the back end that makes it very easy for myself who doesn't have a technical background to do.
There's a lot of great native Shopify apps that are available. Anything from creating a menu for you to sending purchase orders, for example. On our products that are drop shipped, we have an app called Simple Purchase Orders. We can select 10 orders and press a button, and it'll send out to their respective manufacturers and they'll know to ship the product where before it was all manual. We would type up an email to this manufacturer and say we need this shipped over here, and then go on to the next one. Now we can do all that with one click.
We use an app for our upsells and cross-sells that we discussed previously. What shows our related products, or similar to the products that you're looking at, that's something that we had built custom. Our cross-sell and upsell app, it's actually called Cross Sell. We use an app that our developer customized a front end to match to our website. On the back end, it's all the cross-sell app.
We use an app called Follow Up Email and Marketing. It'll send an email to the customers after their order, maybe a month or so, and see how they're doing. We have a couple of apps that can check for fraud. We're not in a very high risk industry, but we still will have some fraud. Any ecommerce business will deal with that at some point. We have a company called No Fraud, where they check every single order and they don't cover the chargeback if there is one. They'll check every order and give you an assessment if they think it's legitimate or not. Then if we still have some concerns, we have another called Signified, which does cover chargebacks, but they'll take 4% of the revenue of the item to do so.
Felix: Business is going great as you reached $34 million in sales last year. What does the year ahead have in store for FactoryPure?
Eugene: We have a few things that we're working on. In the last couple years, we've placed a very heavy focus on our infrastructure. We grew a lot more quickly than we were ready for. Now we're taking the time to retroactively build systems that can scale. We're investing in our people and trying to keep the best people around. Our employee turnover at the beginning was very high and it's not that way anymore. We're really investing in keeping our employees happy, which then translates to keeping the customers happy.
We're trying to expand our physical space, and most of what we sell, we do have to stock. Our new warehouse basically doubles our storage space to make it easier to supply what we need. It makes it a lot easier to forecast. Previously, when we were ordering in advance, it was very difficult because we didn't know how much space we would have by the time this product shipped in six months. You extrapolate that to 10, 20, 30 brands, it's hard to know what to order.
Now that we have another warehouse, we don't have to worry about over-ordering. Eventually I want to increase our coverage of the US as far as shipping and perhaps have a distribution center somewhere outside of Texas. Maybe a couple more where we can get to the whole country within a day or two. That's what our focus is going to be for the rest of this year.